Panetta Seeks to Reassure Defense Industry on Budget Cuts

By Viola Gienger and Roxana Tiron -
Sep 13, 2011

Defense Secretary Leon Panetta told
a defense industry group it is “essential” to U.S. military
superiority and said he will work with executives to establish
policy for the industrial base as the Pentagon faces at least
$330 billion in budget cuts over 10 years.

Panetta expressed his “desire to work together to
formulate a policy for industrial base that I believe we’ve not
had in place until now,” Chief Executive Officer Jim Albaugh of
Boeing Co. (BA)’s commercial aircraft said today at a meeting of the
Aeroclub in Washington.

Establishing policy to guide the industrial base “needs to
be addressed, and we both feel very strongly” about getting it
done, Albaugh said in a short interview after his speech,
referring to Panetta. “We are going to work together to do
that.”

For the first time “in 100 years,” the Defense Department
lacks any “active manned aircraft design teams,” he said.
Lockheed Martin Corp. (LMT)’s F-35 Joint Strike Fighter is the only
new fighter jet in the Pentagon’s buying plans. The F-35 is
designed to replace older fighter jets over the next 30 years
for the Air Force, Navy and Marine Corps. “Having a strong
industrial base is not a given,” Albaugh said.

“The secretary emphasized to this group of industry
partners that the Defense Department can’t protect the nation
without the support of a strong defense industrial base,”
Little told reporters at the Pentagon.

Panetta is seeking to reassure major weapons manufacturers
and win their cooperation as the Defense Department considers
how to make the spending cuts demanded by the Budget Control
Act, signed Aug. 2 by President Barack Obama. The Pentagon faces
as much as $500 billion in further reductions if a congressional
supercommittee fails to agree on other ways to reduce the
federal debt.

‘Devastating’ Cuts

Panetta emphasized again during the meeting that such a cut
“would be devastating,” Little said.

The association plans to kick off a campaign tomorrow to
highlight the “devastating job losses, national security
threats and infrastructure implications that would result from
budget cuts put in motion by this summer’s debt-ceiling deal,”
according to a Sept. 12 statement on the group’s website.

Association spokeswoman Alexis Allen declined to comment on
the meeting or reveal which members of the group’s executive
committee attended. She said association President and Chief
Executive Officer Marion Blakey will comment at the campaign
kickoff press conference tomorrow.

Obama’s nominee to become Panetta’s deputy defense
secretary, Ashton Carter, told a Senate committee considering
his nomination today that the Pentagon’s weapons-buying system
is “not acceptable.”

Carter, the undersecretary of defense for acquisition,
technology and logistics, told the Senate Armed Services
Committee that further steps will be taken to rein in costs
beyond the measures adopted under a 2009 reform law.

Panetta said in his meeting that he considered research and
development a priority, according to Little.

‘Creativity and Innovation’

“Creativity and innovation in the private sector are
absolutely essential to developing what we need to provide for
the nation’s defense,” Little said.

Panetta also discussed efforts to revise and improve the
nation’s export-control regulations for defense items. He
pledged to the group that the changes would be made “in a way
that allows American companies to sell their goods and services
and materiel to other countries,” Little said, without
providing specifics.

The defense chief plans to conduct regular meetings with
the aerospace association and similar groups, Little said.